Verizon Wireless has struck a $3.6 billion deal to buy wireless spectrum covering 259 million Americans from Comcast, Time Warner Cable and Bright House Networks. The deal comes just as rival AT&T's $39 billion attempt to buy T-Mobile USA flounders in the wake of opposition from the Federal Communications Commission.

The Verizon deal is also pending FCC approval, however. Verizon claims "This sale of spectrum is an important step toward ensuring that the needs and desires of consumers for additional mobile services will not be thwarted by the current spectrum shortage." Specifically, Verizon is attempting to buy SpectrumCo, a joint venture between Comcast, Time Warner, and Bright House, which owns 122 Advanced Wireless Services spectrum licenses. Comcast owns 63.6 percent of SpectrumCo while Time Warner owns 31.2 percent and Bright House owns 5.3 percent. The companies involved in this deal also said they have struck an agreement giving the cable companies the option to sell Verizon Wireless service on a wholesale basis, and started a joint venture "for the development of technology to better integrate wireline and wireless products and services."

The Wall Street Journal notes that Verizon's deal would give it more capacity as it builds out its 4G network, and "a competitive advantage as AT&T devotes more resources into getting the T-Mobile buyout past regulatory muster."

The T-Mobile buyout is pointless. Apart from reducing the number of competitors in the wireless market, what does AT&T gain for 39 BILLION DOLLARS? Wouldn't they be better of building a better network? Wouldn't that be cheaper, too?

It's one of those deals that doesn't do anything useful, but it makes AT&T and T-Mobile's board members richer.

The T-Mobile buyout is pointless. Apart from reducing the number of competitors in the wireless market, what does AT&T gain for 39 BILLION DOLLARS? Wouldn't they be better of building a better network? Wouldn't that be cheaper, too?

It's one of those deals that doesn't do anything useful, but it makes AT&T and T-Mobile's board members richer.

ATT was going after T Mobile for their existing network and spectrum. What V purchased was spectrum. That's great. Now they have to go out and retool their network to use it.

T-Mobil should get in on this too. They have $4 billion to add to the kitty.

All things considered, we are pretty happy with Verizon Wireless. The price could be better, but then again we have 4 phones (all with US and Canada coverage) and data plans, plus we have wireless data plans for our computers. Cost is just over $200 per month though.

Coverage is very good though in our area. Far better than the competition (hello, at&t) and comcast doesn't service our area (no cable at all in the area).

I hope for the sake of you Americans that the FCC quashes the spectrum sale. That's the spectrum that T-Mobile could use to become a viable 4th nationwide LTE provider, which is no doubt a part of why Verizon is making the deal now.

If they wait, T-Mobile will get the $3B breakup fee from AT&T that they could have put toward such a purchase themselves. In buying it now, Verizon prevents that spectrum from falling into the hands of a competitor, and to the best of my knowledge, they already have sufficient spectrum for a nationwide rollout.

Unless I'm mistaken, this Verizon purchase is all AWS spectrum, which doesn't really mesh with their existing 700MHz LTE rollout, while T-Mobile USA is already using AWS frequencies, and would be the logical purchaser for such spectrum licenses. Is there a good reason that I'm not seeing that would explain the logic of such a purchase for Verizon (aside from kneecapping the competition that is)?

This SpectrumCoAWS is 120 licenses at 2x10MHz (which is the configuration they use now for LTE nationwide) and 2 licenses at 2x5 (LTE here wont help much, but these two licenses are in Hawaii). You can view a list of licenses here and select SpectrumCoAWS (I'd link to the results directly but the FCC's website only recently went from 1994 to 2001 - its still 10 years behind).

Most of the unused wireless spectrum is owned by companies such as Clearwire, LightSquared, and Dish Network. But so far these companies have been slow to build networks using their available spectrum.

Clearwire has almost 170MHz of spectrum in the 2.5GHz band they're not using much (196MHz total minus 30MHz for WiMAX and the rest is unused, though its not 196Mhz nationwide, some markets have less), and Dish has 6MHz unpaired in the 700 block, which isn't going to help anyone, but they acquired 40MHz in the 2000Mhz area originally designated as satellite but they are asking the FCC to convert it to terrestrial broadband and their spectrum neighbor (Sprint) said they were OK with it - if used for TD-LTE could have per-user speeds of around 20Mb/s down and 5Mb/s up. Cox has 2x5Mhz in many markets they serve with cable that they announced they aren't going to use (and probably sell, hopefully to AT&T who holds adjacent spectrum in many of those markets).

What we need is a spectrum shakeout. Substantial financial penalties for non-use of otherwise productive spectrum.

Edit:

Invid wrote:

Unless I'm mistaken, this Verizon purchase is all AWS spectrum, which doesn't really mesh with their existing 700MHz LTE rollout, while T-Mobile USA is already using AWS frequencies, and would be the logical purchaser for such spectrum licenses. Is there a good reason that I'm not seeing that would explain the logic of such a purchase for Verizon (aside from kneecapping the competition that is)?

Not only that but in many markets, the SpectrumCoAWS spectrum is adjacent to T-Mo's current AWS spectrum. For example in Chicago, IL (Cook County), T-Mo has 1710-1720, and SpectrumCoAWS has 1720-1730 (plus the other 2.1Ghz pairs for uplink). So T-Mo could have had a 2x20 configuration for LTE, twice as fast as AT&T or Verizon LTE if they could clear out the 10Mhz block in use now.

Sadly, the FCC's job isn't to pick and choose who gets what spectrum, and to make sure all major parties have enough spectrum to go around. This is (sadly) a case where the free market hurts the public interest and any work by the FCC to stop this would probably be met with cries of SOCIALISM!

Edit2: Also, Verizon does currently own some AWS spectrum, I don't know if they're using it though - it might be just sitting there empty (its only a 2x5MHz chunk and is not adjacent to the SpectrumCoAWS block).

Most of the unused wireless spectrum is owned by companies such as Clearwire, LightSquared, and Dish Network. But so far these companies have been slow to build networks using their available spectrum.

From the same article... (just one paragraph above).

Quote:

In total, U.S. operators have licenses for about 538MHz of wireless spectrum. Only about 192MHz of that spectrum is currently being used. And of the spectrum that is being used, 90 percent of it has been allocated to existing 2G, 3G, and 3.5G wireless services by larger wireless carriers, such as AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA.

Since you missed it the first time, I even highlighted it for you.

Yes, spectrum hording is a problem, the US government itself is a large offender as well, but most of the wireless industry's spectrum is still being used for services that underutilizes the bands they already have.

Unless I'm mistaken, this Verizon purchase is all AWS spectrum, which doesn't really mesh with their existing 700MHz LTE rollout, while T-Mobile USA is already using AWS frequencies, and would be the logical purchaser for such spectrum licenses. Is there a good reason that I'm not seeing that would explain the logic of such a purchase for Verizon (aside from kneecapping the competition that is)?

Not only that but in many markets, the SpectrumCoAWS spectrum is adjacent to T-Mo's current AWS spectrum. For example in Chicago, IL (Cook County), T-Mo has 1710-1720, and SpectrumCoAWS has 1720-1730 (plus the other 2.1Ghz pairs for uplink). So T-Mo could have had a 2x20 configuration for LTE, twice as fast as AT&T or Verizon LTE if they could clear out the 10Mhz block in use now.

Sadly, the FCC's job isn't to pick and choose who gets what spectrum, and to make sure all major parties have enough spectrum to go around. This is (sadly) a case where the free market hurts the public interest and any work by the FCC to stop this would probably be met with cries of SOCIALISM!

Edit2: Also, Verizon does currently own some AWS spectrum, I don't know if they're using it though - it might be just sitting there empty (its only a 2x5MHz chunk and is not adjacent to the SpectrumCoAWS block).

Very informative, thank you. I agree that such interference by the FCC would be viewed in a dim light by many Americans, and your summary matches my (very loose) understanding of the spectrum landscape in the USA. Those spectrum blocks would position T-Mobile very well for future LTE deployment, and allow them to be a significant player, assuming they could raise sufficient capital for the infrastructure roll-out. I can see why Verizon has chosen this time to tie it up if they were eyeing it at all previously. I doubt they'd have made the offer if it looked like the AT&T-T-Mobile merger would make it past regulators.

The one thing that would really help the spectrum difficulties in the USA would be strong utilization rules that claw back spectrum if it is not put to productive use in a reasonable timeframe. Use-it-or-lose-it would would effectively eliminate the tactic of buying up spectrum just to keep competitors out of the market, and also allow the free market a little more room to work.

In total, U.S. operators have licenses for about 538MHz of wireless spectrum. Only about 192MHz of that spectrum is currently being used. And of the spectrum that is being used, 90 percent of it has been allocated to existing 2G, 3G, and 3.5G wireless services by larger wireless carriers, such as AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA.

Since you missed it the first time, I even highlighted it for you.

Yes, spectrum hording is a problem, the US government itself is a large offender as well, but most of the wireless industry's spectrum is still being used for services that underutilizes the bands they already have.

I'd argue that the carriers are doing a fair job (not great, not poor) of pruning old technologies. If Sprint were to switch to 100% LTE, guess what - everyone's Kindle's would stop working because they use Sprint's CDMA network for book delivery. My work has a lot of rugged mobile modems out in the field that use 3G data for internet and GPS location and we don't have the money to upgrade them all to 4G modems right now. So they cant prune old network technologies as fast as you might like. You need new spectrum for new technologies (4G) and eventually consolidate older bands into the newer technology.

In the T-Mobile example I cited above, they have 2x5Mhz GSM/3G and a 2x10MHz GSM/3G spectrum. If they would have got that SpectrumCoAWS spectrum instead of Verizon, they could have added 2x10 LTE. Eventually (in 3-5 years) after they manage to get LTE capable phones as well as push most of their customers through a round of upgrades (including getting the price of LTE phones down to $0 after subsidy), then they can cram down whats left of the 3G base into that 2x5 chunk and expand the LTE to 2x20. This would take a long time to do - not everyone out there are hardcore nerds like us who upgrade their phone every 12-24 months. My grandmother still has the same 2G GSM AT&T clamshell phone she got in 2006. Why? Because it still works. She wouldn't know what to do with a smartphone.

It takes a long time to shut down old spectrum. You can rearrange it if you can get enough people to upgrade but just getting them into the store is hard enough.

If I were AT&T, I'd already be going for their jugular over this before it even hits snags.

It's a clever play by Verizon and the price is not insignificant. $3.6b when T-Mo will be getting $4b from their deal with AT&T if it fails? That's kind of a slap in T-Mo's face saying, "See what you could have gotten if you had your money now? Haha!"

All of these companies are underhanded. They're all out for money. You can't spank one and pat the other on the head and give it a cookie.

It's a clever play by Verizon and the price is not insignificant. $3.6b when T-Mo will be getting $4b from their deal with AT&T if it fails? That's kind of a slap in T-Mo's face saying, "See what you could have gotten if you had your money now? Haha!"

Minor correction: T-Mobile gets $3B from AT&T as part of the breakup fee. The remaining $1B is the value of AT&T's AWS spectrum that they hand over, not cash.

This transaction is unfortunate as it merely adds further market power to one of the 2 market leaders in the US. Both Verizon & AT&T already sit on loads of unused spectrum, merely to shut out any competitors. For Verizon, this deal is great - for consumers, it is horrible.

The one thing that would really help the spectrum difficulties in the USA would be strong utilization rules that claw back spectrum if it is not put to productive use in a reasonable timeframe. Use-it-or-lose-it would would effectively eliminate the tactic of buying up spectrum just to keep competitors out of the market, and also allow the free market a little more room to work.

Or the FCC could have leased the spectrum rather than sell it. All the sales and action cost paid by the carriers end up as part of their infrastructure cost, which we, the customers, ultimately have to bear. If it were leased under the condition that it had to be used, the leasees would have more incentive to build out rather sit on it.

There should be efficiency parameters that are used when assigning out spectrum. The FCC should validate it's power with congress and supreme court, so it can be allowed to juggle spectrum based on efficient usage. FCC was created to manage a "natural resource" radio spectrum, and since it has the power to giveth it should have the power to taketh away based on efficiency, utilization and need. The government should "hog" the majority of the spectrum as long as the demand is being met. The less spectrum that is available the higher the license as well as the more the FCC should manage along with the service providers/business using spectrum.

That's plum ridiculous. Spectrum should be freely available to the public so free market economics can accelerate innovation and market efficiencies.

Charging a one-time fee of as much as $65 per subscriber for spectrum those subscribers already own is just wrong. Open the Spectrum up to the free market. These monopoly players now will want to skewer the public for 10x that $65, when in a competitive market, 2x that money would sustain a business, and with flexible plans, like those T-Mobile offered, it could actually be a real Public Interest investment.

Smells like more spectrum being 'corralled' into the grips of yet another monopolistic play. 4 owners down to 1.

The Washington Post characterizes this deal completely differently. It has precious little to do with spectrum. First, it gets Comcast out of the wireless game. Second, the deal includes a joint marketing agreement between Comcast and Verizon. "But perhaps the most extraordinary aspect of the deal is its cooperative marketing arrangement, which calls for the cable companies and Verizon to 'become agents to sell one another’s products.'" Since Verizon would then be selling both Comcast cable and FiOS, Verizon might cut back on FiOS, leaving cable to Comcast in trade for Comcast abandoning any plans to enter the wireless market.

As I recall, the deregulation of rates in the Telecommunications Act was predicated on the idea of competition between different service providers. Apparently, there won't be any.

Yeah, Verizon is already misappropriating the terms of acquiring the C Block, they don't need any more. It's like everyone just forgot how they promised fair availability of applications on smart phones to get the last batch of spectrum and promptly blocked competing 3rd party products in the Android store. Not to mention the loss of unlimited data and an agenda to itemize every port on the Internet as separate services.